FDIC Law, Regulations, Related Acts

4000 - Advisory Opinions

Insurance Coverage of Municipal Accounts

FDIC-87-55

December 23, 1987

Claude A. Rollin, Attorney

This is in response to your letter of December 11, 1987 (copy
enclosed) by which you requested an opinion concerning the extent to
which federal deposit insurance would be afforded to the funds of the
Village of *** deposited at ***, an FDIC-insured institution, in the
following accounts:

1. Village General Checking Account

2. Village of *** --Electrical (CD)

3. Village of *** --Water (CD)

4. Village of *** --Fire Department (CD)

5. Village of *** --Cemetery (CD)

6. Village of *** --Endowment (CD)

7. Village of *** --V.P. II (CD)

Section 330.8(a) of the FDIC's regulations, 12 C.F.R. § 330.8(a),
provides that each official custodian of the funds of a state, county,
municipality or political subdivision thereof (hereinafter "public
unit") is entitled to separate deposit insurance of: (1) up to
$100,000 in the aggregate for all time and savings deposits placed in
an insured bank in the same state; (2) up to $100,000 in the aggregate
for all demand deposits placed in an insured bank in the same state;
and (3) up to $100,000 in the aggregate for deposits of any type placed
in an insured bank outside the state. If a public unit has autonomous
subdivisions or departments in the sense of 12 C.F.R. § 330.8(c)
(discussed below) then each such additional public unit is entitled to
separate deposit insurance for its funds in the amounts specified in
the preceding sentence. The available deposit insurance is the same
whether each public unit has its own official custodian or one person
serves as the official custodian for all such public units. 12 C.F.R.
§ 330.8(a)(6). In other words, a person may serve as the official
custodian or more than one public unit and, in that case, he or she
would be separately insured as to the funds of each public unit. It is
important to note, however, that in all cases the custodial nature of
the accounts and the ownership interests in the deposited funds must be
ascertainable from proper records. 12 C.F.R. § 330.1(b)(1) and (2)
(per 12 U.S.C. § 1822(c)).

In your letter, you do not indicate whether the "Village General
Checking Account" is a regular checking account, a NOW account or a
Money Market Deposit Account ("MMDA"). If it is a regular
checking account, then it would be classified as a demand deposit and,
as such, would be insured separately, up to $100,000, from all of the
certificates of deposit held by the Village in the same bank. On the
other hand, if it is a
NOW or MMDA account (which are
classified as time and savings deposits) then it would not be insured
separately from the Village's certificates of deposit.

With respect to the certificates of deposit, the issue raised by
your letter is whether those accounts would be insured separately, up
to $100,000 each, or whether they would be aggregated and insured up to
$100,000 in toto. The answer to that question requires an
analysis of whether the funds in those accounts are owned by the
Village itself or by a political subdivision/principal department of
the Village. In order to qualify as a political subdivision or
principal department entitled to public unit status, an entity (1) must
have been expressly created or authorized by state statute; (2) must
have some functions of government delegated to it by state statute; and
(3) must have funds allocated to it by statute or ordinance for its
exclusive use and control. 12 C.F.R. § 330.8(c). The term
"political subdivision'' includes drainage, irrigation, navigation,
improvement, levee, sanitary, school or power districts, and bridge or
port authorities and other special districts created by state statute
or compacts between the states. 12 C.F.R. § 330.8(c).

Based upon the information that you provided in your letter, it
seems that all of the certificates of deposit are owned by the Village
of ***, and not by autonomous political subdivisions or principal
departments thereof. The certificates are all in the name of the
Village of ***, and they are distinguished only by the purpose for
which the funds are used, i.e. water, electrical. None of the
certificates appear to be owned by autonomous subdivisions or principal
departments of the Village which would qualify for public unit status.
Therefore, all of the certificates of deposit would be added together
and the total would be insured up to $100,000. If, however, any of the
certificates are in fact owned by an entity which satisfies the
above-noted test for public unit status, then they would be insured
separately from the certificates owned by the Village
itself.